Resolving a conflict in the Courts of Appeal, the Supreme Court today in Grande v. Eisenhower Medical Center holds that an employee’s settlement of her Labor Code and Unfair Competition lawsuit against a staffing agency did not bar her from then alleging the same claims against her employer in a later action.

The court’s unanimous opinion by Chief Justice Tani Cantil-Sakauye says that the employer’s claim preclusion defense “can be asserted only by a party in the first action or someone in privity with a party in the first action” and that the staffing agency and the employer have “different legal interests.” The opinion explains, “ ‘privity’ is not merely a term that describes a close relationship between two entities; it implies that a judgment against one could have been used against the other, even though that entity was not a party to the judgment.”

The court also finds the settlement agreement releasing the staffing agency’s “agents” did not cover the employer in this particular case, although it warns in general, “the broader notion that a client is an ‘agent’ of a staffing agency is not free from doubt.” Additionally, the opinion concludes, the staffing agency’s agreement to indemnify the employer cannot bar the employee’s second lawsuit because the employer “has not established that the staffing agency was sued in its capacity as indemnitor.”

The court affirms a divided Fourth District, Division Two, Court of Appeal published opinion. It disapproves the Second District, Division Two, decision in Castillo v. Glenair, Inc. (2018) 23 Cal.App.5th 262, with which the Fourth District had disagreed. The Supreme Court denied review in Castillo.